Greek bailout

New elections have been called in Greece and so we look at the timeline of what might happen in the coming months and the consequences if a solution to Greece’s problems is not found.

With market strains increasing rapidly, the ECB remains the one with the capacity to react fast. After the ECB has acted first to try to bring some calmness to markets, something could happen on the government front as well.

Everybody thinks it is almost certain Greece will leave the Euro-zone. And while it might happen, is it really that certain?

News that the Democratic Left have tentatively agreed to participate in a grand coalition offers hope of a new Greek government being announced this weekend.

With 99% of the votes from Sunday’s general elections counted, the two “big” parties – the conservative New Democracy and the socialist PASOK – won 149 seats in the 300-seat parliament and hence lack two seats to form a majority coalition.

Markets are expected to set out with a negative tone towards risk today after the uncertain Greek election outcome and the very soft US employment report Friday. Hollande won in France, as expected.

The ECB’s bond purchases have been very modest recently. Arguably, bigger purchases would not even have been necessary lately. However, the Securities Markets Programme of the ECB has become more of a blunt weapon also in general, and has less potential to fight the debt crisis, if the need arises again.

Making a case for why an improvement could be lurking beneath the fog of doom and gloom.

Nordea’s Chief Analyst on the euro area presents his view on the latest developments in the European debt crisis.

• Future path of Greece and sovereign debt crisis highly uncertain
• Only the ECB can comfort markets via committed bond purchases – directly or indirectly
• Stay in the inner AAA-space, long duration, curve flatteners and long spread-over